Can I Claim Cents per Kilometre if I Have a Novated Lease?

One of the common questions surrounding novated leases is whether you can claim cents per kilometre for business travel. While novated leases come with various tax benefits, the ability to claim deductions for kilometres driven is a bit more nuanced.

When you have a novated lease, the car is technically under a salary packaging arrangement. This means that your employer pays for the car expenses, including running costs like fuel, maintenance, insurance, and registration, through pre-tax and post-tax contributions from your salary. As these expenses are already covered in your salary packaging, the Australian Taxation Office (ATO) does not allow you to claim the cents per kilometre method for business travel using a novated leased vehicle.

However, you can still potentially claim some deductions related to the vehicle, but only under specific circumstances. For instance, if you use your novated leased vehicle for business purposes and your employer does not fully reimburse the business-related costs, you may be eligible to claim the business portion of expenses not covered by your employer. To do this, you would need to keep detailed records of your work-related travel and maintain a logbook for at least 12 consecutive weeks.

It's also important to note that novated leases are structured to already provide significant tax savings. Since the running costs of the vehicle are paid for using a portion of your pre-tax salary, you're effectively reducing your taxable income. This can be more beneficial in the long run than claiming the cents per kilometre deduction.

In summary, while you cannot claim cents per kilometre for a novated lease vehicle, the tax benefits of a novated lease often outweigh the potential savings from claiming per kilometre deductions. If you're unsure about the tax implications of your novated lease, it’s best to speak with a tax advisor to ensure you're maximising your benefits.

Ready to explore the advantages of novated leasing? Contact us today to learn how a novated lease can help you save on your next vehicle purchase.